Is there sales tax in the UK? VAT for US businesses

There is no sales tax in the UK. Instead, the UK charges Value Added Tax (VAT), usually at 20%, on most sales of goods and services. A US business selling to UK customers may have to register for UK VAT from its first sale, because the £90,000 registration threshold does not apply to businesses based outside the UK.

How is UK VAT different from US sales tax?

VAT is a national tax charged at every stage of the supply chain, while US sales tax is set by states and localities and charged only on the final retail sale. VAT-registered businesses charge VAT on their sales and reclaim the VAT they pay on their costs, so the tax falls on the final consumer.

What are the UK VAT rates?

GOV.UK lists three rates:

• Standard rate, 20%: most goods and services.
• Reduced rate, 5%: for example, children’s car seats and home energy.
• Zero rate, 0%: for example, most food and children’s clothes.

Some supplies, such as certain financial and insurance services, are exempt. Work out a price with our VAT calculator or check items in VAT rates and exemptions.

Does a US business have to register for UK VAT?

Yes, if it makes any taxable supply in the UK and has no UK establishment. HMRC calls such a business a non-established taxable person, or NETP. VAT Notice 700/1, last updated 5 August 2026, says the registration threshold “does not apply” to NETPs.

HMRC’s manual at VATREG37050, updated 27 October 2026, sets out the rules:

1. No threshold. Register regardless of the value of the taxable supply. NETPs lost the right to use the UK threshold in December 2012.
2. 30 days. Notify HMRC within 30 days of your first UK taxable supply, or of first expecting to make one.
3. Backdating. Registration takes effect from the date of the first supply, and HMRC can register you retrospectively.

UK-based businesses only register once taxable turnover passes £90,000 in 12 months. That is the figure most US sellers find online, but it does not help them. See VAT registration for the UK process.

Do you need a UK representative?

No, it is optional. You can register and deal with HMRC yourself. If you appoint a tax representative, Notice 700/1 says they are jointly and severally liable for your VAT debts.

Which applies to you?

Your obligations depend on what you sell and to whom.

• If you sell goods to UK consumers in consignments of £135 or less: charge UK VAT at the point of sale and account for it on a UK VAT return. If you sell through an online marketplace, the marketplace usually accounts for the VAT.
• If your consignments are over £135: import VAT and any customs duty are due when the goods enter the UK. Agree in advance whether you or the customer pays.
• If you hold stock in the UK, such as in a fulfilment centre: register and charge VAT on your UK sales, whatever their value.
• If you sell digital services, such as software, apps or streaming, to UK consumers: register and charge UK VAT, unless a third-party platform accounts for it.
• If you sell services to UK VAT-registered businesses: the reverse charge usually applies, so you do not charge UK VAT.
• If you only buy in the UK and make no UK sales: you do not register, but you may reclaim UK VAT through a refund claim.

The £135 rules are in HMRC’s guidance on overseas goods sold directly to UK customers. The limit applies to the whole consignment, not each item. Northern Ireland follows different rules for goods.

How do digital services and B2B sales work?

For digital services, the place of supply is where the consumer usually lives, according to GOV.UK’s digital services guidance. Keep evidence of location, such as a billing address, IP address or bank details. Without a valid UK VAT number from the customer, treat the sale as business to consumer.

For most other services sold business to business, the place of supply is where the customer belongs, under section 6.3 of VAT Notice 741A. The UK customer then applies the reverse charge. See reverse charge VAT and VAT on digital services.

What happens after you register?

You get a UK VAT number and must charge VAT, keep digital records and file VAT returns, usually quarterly. All VAT-registered businesses must follow Making Tax Digital for VAT, filing through compatible software. Returns and payments are due one month and seven days after each period ends.

Budget 2026 also confirmed changes to VAT liability for some online marketplace sales from October 2027. Details will follow in legislation.

What to do now

1. List what you sell to UK customers: goods, digital services or other services.
2. Check whether any sale is a UK taxable supply with no reverse charge.
3. If it is, register within 30 days and ask whether backdating applies to past sales.
4. Set up software that handles UK VAT and Making Tax Digital.
5. If you only incur UK VAT, see VAT refunds for non-UK businesses.

Frequently asked questions

Is there sales tax in the UK?

No. The UK charges VAT instead, at a standard rate of 20%, a reduced rate of 5% and a zero rate of 0%.

What is the VAT threshold for a US company selling to the UK?

There is none. A business with no UK establishment must register for VAT if it makes any taxable supply in the UK.

Do US sellers charge VAT on orders under £135?

Yes, for goods sold to UK consumers in consignments of £135 or less, the seller charges VAT at the point of sale. If an online marketplace facilitates the sale, the marketplace usually does.

Do I charge UK VAT on services to UK businesses?

Usually not. For most business to business services, the UK customer accounts for VAT under the reverse charge.

Can a US business reclaim UK VAT?

Yes. A registered business reclaims it on its VAT return. An unregistered business with no UK sales may use HMRC’s refund scheme for non-UK businesses.